World Economic News

Another British Interest Rate Hike Coming Up

With inflation running at the highest rate in 15 years in Britain, there could be another interest rate hike in Britain in the coming month or so, the fourth in seven months, the Daily Mail reported Jan. 17. The Bank of England raised rates a quarter-point in January, an unusual move. Another rate hike will hit mortgage holders, especially first-time buyers. At the same time, as the Home.co website reported, mortgage lenders are taking fixed-rate mortgage deals off the market, to profit from the interest rate hikes. Some 12 lenders have already suspended fixed-rate mortgages, just one week after the Bank of England raised rates. These lenders have increased their standard variable rates for mortgages.

Britain's Retail Prices Index, which includes housing costs, rose 4.4% last year, the fastest since 1991. Gas prices are up 32% from last year, the highest rate of increase since 1963. Also, the Council of Mortgage Lenders said recently that current young house buyers are facing worse problems than any earlier generation.

Euro, Pound Sterling Displace Dollar in Bond Markets

For the second year in a row, euro-denominated bonds made up 45% of the global bond market, compared to 37% for the dollar-denominated bonds, the Financial Times reported Jan. 14. For the past three years, the pound sterling has been growing as a "niche currency" for some investors to reach 10% of the bond market. At the end of 2006 outstanding bond debt issued in the euro was an equivalent of $4,836 billion, whereas that issued in the dollar was $3,892 billion according to International Capital Market Association data; the new issuances last year accounted for almost half of the total market.

As recently as 2002, issuances in euros represented just 27% of the global pie, compared with 51% for the dollar.